Pinnacle West Capital Corporation · NYSE:PNW
Pinnacle West Capital — Wolfe Research Utilities & Energy Conference (September 2020)
36 slides from Pinnacle West Capital's conference presentation, Sep 30, 2020
Slide 1: Powering Growth, Delivering Value
POWERING GROWTH DELIVERING VALUE Investor Meetings September 2020 Powering the Future | 1
Slide 2: Forward Looking Statements
FORWARD LOOKING STATEMENTS This presentation contains forward-looking statements based on current expectations, including statements regarding our earnings guidance and financial outlook and goals. These forward-looking statements are often identified by words such as “estimate,” “predict,” “may,” “
Slide 3: Pinnacle West: Who We Are
PINNACLE WEST: WHO WE ARE We are a vertically integrated, regulated electric utility in the growing Southwest United States. Our Business Our Energy Resources Pinnacle West operates Arizona Public Service Company (“APS”), our principle subsidiary Consolidated $19B Assets Arizona’s largest and longes
Slide 4: Senior Management Team
SENIOR MANAGEMENT TEAM We maintain a robust pipeline of talent to serve our complex operations and facilitate effective succession planning in a highly competitive talent environment Jeff Guldner Jim Hatfield Chairman of the Board, President and Executive Vice President, Chief Administrative “We hav
Slide 5: Building a Sustainable Future
BUILDING A SUSTAINABLE FUTURE We are working to meet business needs with practices that balance a healthy environment, a vibrant economy and strong communities for future generations Clean Affordable Building a clean energy future with our goal to deliver Delivering affordable energy for the benefit
Slide 6: COVID-19 Response Highlights
COVID-19 RESPONSE HIGHLIGHTS ✓ Suspending power disconnects and waiving penalties, late fees and interest payments ✓ Simplifying access to existing customer support programs ✓ Committing to provide our communities with support by contributing $8 million to assist customers and non-profits affected b
Slide 7: Energy Usage and Sales
ENERGY USAGE AND SALES On the strength of residential sales, year-over-year weather-normalized sales growth for all customer classes has risen to 1% during the recovery period. From March 13th through August 31st the cumulative year over year reduction in weather-normalized usage was (1)% YoY Approx
Slide 8: Preliminary Weather-Normalized Energy Trend
PRELIMINARY WEATHER-NORMALIZED ENERGY TREND Daily Energy Normalized Actual: 2020 vs 2019 March 1 - August 31 Week of May 11th businesses began reopening and stay-at-home guidelines expired Mar 1 Mar 15 Mar 29 Apr 12 Apr 26 May 10 May 24 Jun 7 Jun 21 Jul 5 Jul 19 Aug 2 Aug 16 Aug 30 Normalized Actual
Slide 9: Arizona COVID-19 Response Timeline
ARIZONA COVID-19 RESPONSE TIMELINE • May 4th – Retail establishments permitted to reopen • May 8th – Hair salons permitted to reopen • May 11th – Dine-in restaurants permitted to reopen • May 13th – Pools, gyms and spas permitted to reopen • May 15th – Stay Home, Stay Healthy, Stay Connected guideli
Slide 10: Well Funded Pension and Healthy Liquidity
WELL FUNDED PENSION AND HEALTHY LIQUIDITY Pension Funded Status Liquidity and Financing Activity 97% 97% • $1.2 billion revolver capacity • $600 million 30-year 3.35% APS senior 90% unsecured notes issued May 2020 • $500 million 5-year 1.30% PNW senior unsecured notes issued June 2020 • All PNW debt
Slide 11: Long-Term Debt Maturity Profile
LONG-TERM DEBT MATURITY PROFILE ($MM) 1,000 750 500 250 0 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044 2046 2048 2050 APS Long-Term Debt PNW Long-Term Debt Powering the Future | 11
Slide 12: Credit Ratings and Metrics
CREDIT RATINGS AND METRICS APS Pinnacle West 2017 2018 2019 Corporate Credit Ratings 1 APS FFO / Debt 29.4% 24.5% 22.5% Moody’s A2 A3 FFO / Interest 7.5x 6.5x 6.4x S&P A- A- Debt / 46.8% 47.0% 47.7% Fitch A- A- Capitalization Pinnacle West Senior Unsecured1 FFO / Debt 26.4% 22.1% 19.5% Moody’s A2 A3
Slide 13: Appendix
APPENDIX Powering the Future | 13
Slide 14: Average Monthly APS Bill
AVERAGE MONTHLY APS BILL Since 2018, changes to adjustors have lowered the average residential customer’s bill $10.95 (7.31% lower) Powering the Future | 14
Slide 15: Economic Indicators
ECONOMIC INDICATORS Monthly Year-over-Year Employment Growth Ending May 2020 U.S. Phoenix Taylor Morrison reports June 2020 as best 5% month in Scottsdale homebuilder’s history 1 0% -5% Custom home lot sales going strong in -10% metro Phoenix despite COVID-19 2 -15% Jan-18 Jan-19 Jan-20 Valley high-
Slide 16: Economic Development
ECONOMIC DEVELOPMENT FUTURE EXPANSIONS OUR APPROACH FOCUSES ON FOUR MAIN AREAS o Stack Infrastructure plans to build a 1 million-square-foot Business Attraction & Expansion - constructive engagement data center on 79 acres in the West Valley less than half a with economic development community partn
Slide 17: APS Clean Energy Commitment
FUTURE FOCUS: CLEAN ENERGY PLAN Clean energy commitments APS Clean • 100% clean, carbon-free electricity by 2050 Energy Commitment • 65% clean energy by 2030 with 45% renewable energy • End APS’s use of coal-fired generation by the end of 2031 A clean economic future • Meet our responsibility to pow
Slide 18: Pathways to 100% Clean
FUTURE FOCUS: CLEAN ENERGY PLAN Pathways to 100% Clean Renewable additions of 300-500 MW/year to meet a 45% target by 2030 Next Steps: Collaboration, alignment and innovation • Reliability and affordability are foundational • Collaborate with customers, stakeholders and regulators • Promote economy-
Slide 19: Hydrogen
HYDROGEN Palo Verde collaborates on a pilot project to explore the production of hydrogen at Palo Verde Generating Station Xcel Idaho Energy Palo Verde National Collaborators Include Energy Laboratory Harbor • The pilot program will examine the long-term cost-effectiveness of hydrogen production at
Slide 20: Coal Exit Strategy
COAL EXIT STRATEGY Navajo 315 MW Cholla Plan to exit coal 387 MW by 2025 7 years earlier Remaining than originally 970 MW projected by 2031 Coal Free 2018 2019 2025 2031 Four Corners Power Plant represented less than 8% of our total rate base as of December 31, 2019 Powering the Future | 20
Slide 21: Integrated Resource Plan
INTEGRATED RESOURCE PLAN A plan to power our customers’ future needs with clean energy 2020-2024 Additions Megawatts • Approximately 2,500 megawatts of renewable energy, demand response, energy efficiency and Demand Side Management 575 energy storage needed between 2020 and 2024. Demand Response 193
Slide 22: Energy Storage Contribution to Reliability
ENERGY STORAGE CONTRIBUTION TO RELIABILITY • System reliability can be maintained by installing Increasing storage longer duration energy storage duration required to maintain reliability • Energy storage helps minimize the need for additional gas resources and allows for higher renewable utilizatio
Slide 23: Cumulative Peak Capacity Needs Through 2028
CUMULATIVE PEAK CAPACITY NEEDS THROUGH 2028 Merchant CC Toll (570MW) expires 4,500 Merchant CC Toll Merchant CC Toll (465 MW) expires (565MW) expires 4,000 3,500 PAC Exchange Large resource (480MW) 3,000 expires CH 1 & 3 needs resulting retirement 2,500 (387MW) from load growth, MW data centers and
Slide 24: System Operating Change: Spring 2025
SYSTEM OPERATING CHANGE Spring 2025 • Energy storage helps reduce the need for winter gas peaking resources and can be charged with zero or negatively priced energy Spring Day – High Renewables with Storage Spring Day – High Renewables, No Storage 6000 6000 5000 5000 4000 4000 3000 3000 2000 2000 10
Slide 25: System Operating Change: Summer 2025
SYSTEM OPERATING CHANGE Summer 2025 • Energy storage reduces the need for gas peaking resources and pipeline capacity Summer Peak Day – High Renewables with Storage Summer Peak Day – High Renewables, No Storage 10000 10000 9000 9000 8000 8000 7000 7000 6000 6000 MW MW 5000 5000 4000 4000 3000 3000 2
Slide 26: Rate Base
RATE BASE APS’s revenues come from a regulated retail rate base and meaningful transmission business APS Rate Base Growth Total Approved Rate Base Year-End Generation & Distribution Transmission ACC FERC Long-term Rate Base Guidance: 19% 6-7% Average Annual Growth $2.3 81% ACC FERC $1.6 Rate Effecti
Slide 27: Operations & Maintenance
OPERATIONS & MAINTENANCE Goal is to keep O&M per kWh flat, adjusted for planned outages $ in millions $933 $858 74 $856 $820 - $840 63 48 40 - 50 795 859 808 780 - 790 2017 2018 2019 2020E PNW Consolidated ex RES/DSM 1 Planned Fleet Outages 1 Excludes RES/DSM of $91 million in 2017, $104 million in
Slide 28: APS Capital Expenditures
APS CAPITAL EXPENDITURES Capital expenditures will support our growing customer base and utilization of advanced technology $ in millions PROJECTED $2,000 $1,800 $1,725 $1,650 $121 $1,600 $154 $44 $53 $1,400 $1,331 Traditional Generation $1,231 $1,200 $141 Ocotillo1 $185 $45 $613 $794 $14 Environmen
Slide 29: Residential PV Applications
RESIDENTIAL PV APPLICATIONS1 4,000 Residential DG (MWdc) Annual Additions 151 133 133 122 3,500 75 3,000 2016 2017 2018 2019 2020 2,500 2,000 1,500 1,000 500 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2017 Applications 2018 Applications 2019 Applications 2020 Applications 1 Monthly data equal
Slide 30: 2020 Key Dates
2020 KEY DATES ACC Key Dates / Docket # Q1 Q2 Q3 Q4 Power Supply Adjustor (PSA): E-01345A-16-0036 Effective: Feb 1 Lost Fixed Cost Recovery: E-01345A-16-0036 Filed: Feb 14 Effective: May 1 Filed: May 15 Transmission Cost Adjustor: E-01345A-16-0036 Effective: Jun 1 Amended Plan Filed: 2020 DSM/EE Imp
Slide 31: 2019 APS Rate Case Application
2019 APS RATE CASE APPLICATION Filed October 31, 2019 Docket Number: E-01345A-19-0236 Additional details, including filing, can be found at http://www.pinnaclewest.com/investors Adjustor Changes and New Mechanisms Overview Formula Rate - Proposed as an alternative to existing adjustor mechanisms Def
Slide 32: 2019 Rate Case Key Financials
2019 RATE CASE KEY FINANCIALS Test year ended June 30, 2019 Total Rate Base - Adjusted $11.12 Billion ACC Rate Base - Adjusted $8.87 Billion Allowed Return on Equity 10.15% Capital Structure Long-term debt 45.3% Common equity 54.7% Base Fuel Rate (¢/kWh) 3.0168 Post-test year plant period 12 months
Slide 33: 2019 Rate Case Key Financials
2019 RATE CASE KEY FINANCIALS Overview of Rate Increase ($ in Millions) - Key Components Four Corners SCRs $ 73 Ocotillo Modernization Project 100 Post-Test Year Plant Additions 66 Net Change in Other Items 64 Tax Expense Adjustor Termination (119) Total Revenue Request $ 184 Powering the Future | 3
Slide 34: APS Rate Case Procedural Schedule
APS RATE CASE PROCEDURAL SCHEDULE Arizona Public Service Company Docket # E-01345A-19-0236 Application Filed October 31, 2019 Staff/Intervenor Direct Testimony (October 2, 2020) Staff/Intervenor Direct Testimony (Rate Design) (October 9, 2020) APS Rebuttal Testimony (November 6, 2020) Staff/Interven
Slide 35: Arizona Utilities General Rate Cases
ARIZONA UTILITIES GENERAL RATE CASES Tucson Electric Power Company Southwest Gas Docket # E-01933A-19-0028 Docket # G-01551A-19-0055 Application Filed April 1, 2019 Application Filed May 1, 2019 Hearing Commenced (Jan 16, 2020) Staff /Intervenor Direct Testimony (Revenue) (Feb 5, Staff’s late-filed
Slide 36: Purchased Power Contracts
PURCHASED POWER CONTRACTS Contract Location Owner/Developer Status 1 PPA Signed COD Term (Years) Net Capacity (MW) Solana Gila Bend, AZ Abengoa IO Feb-2008 2013 30 250 RE Ajo Ajo, AZ Duke Energy Gen Svcs IO Jan-2010 2011 25 5 SOLAR Sun E AZ 1 Prescott, AZ SunEdison IO Feb-2010 2011 30 10 310 MW Sadd
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